JavaScript is disabled for your browser. Some features of this site may not work without it.

An empirical survey of certain key aspects of the use of statistical sampling by South African registered auditors accredited by the Johannesburg securities exchange

Swanepoel, Elmarie (2011-12)

Thesis (MAcc)--Stellenbosch University, 2011.

Thesis

ENGLISH ABSTRACT: The quality of external audits has increasingly come under the spotlight over the last
decade as a result of a number of audit failures. The use of scientifically based statistical
sampling as a sampling technique is allowed, but not required by International Standards
on Auditing. The science behind this sampling technique can add to the credibility and
quality of the audit. Accordingly the main objective of this study was to explore certain key
aspects of the use of statistical sampling as a sampling technique in the audits of financial
statements done by South African Registered Auditors accredited by the Johannesburg
Stock Exchange (JSE).
A literature review of the most recent local and international studies related to the key
aspects addressed in this study was done. An empirical study was then done by means of
a questionnaire that was sent to the JSE-accredited auditing firms for completion. The
questionnaire focused on what was allowed by the firms’ audit methodologies regarding
the key aspects investigated in this study and not on the actual usage of statistical
sampling in audits performed by the firms.
The following main conclusions were drawn in respect of the four key aspects that were
investigated:
1. In investigating the extent to which statistical sampling is used by auditing firms, it was
found that the majority of them was allowed to use the principles of statistical
sampling. Upon further investigation it was found that only 38% were explicitly allowed
to use it in all three sampling steps (size determination, selection of items and
evaluation of results). The evaluation step was identified as the most problematic
statistical sampling phase.
2. Two reasons why auditors decided not use statistical sampling as a sampling
technique were identified, namely the perceived inefficiency (costliness) of the
statistical sampling process, and a lack of understanding, training and experience in
the use thereof.
3. In investigating how professional judgement is exercised in the use of statistical
sampling, it was found that the audit methodologies of the majority of the auditing firms
prescribed the precision and confidence levels to be used, and further that the minority indicated that they were allowed to adjust these levels using their professional
judgement. The partner in charge of the audit was identified to be typically responsible
for final authorisation of the sampling approach to be followed.
4. It was found that approximately a third of the auditing firms did not use computer
software for assistance in using statistical sampling. The majority of the auditing firms
did however have a written guide on how to use statistical sampling in practice
available as a resource to staff.
The value of this study lies in its contribution to the existing body of knowledge in South
Africa regarding the use of statistical sampling in auditing. Stakeholders in statistical
sampling as an auditing technique that can benefit from this study include Registered
Auditors in practice, academics, and, from regulatory, education and training perspectives,
the Independent Regulatory Board for Auditors and the South African Institute of
Chartered Accountants.